Macquarie Plans Share Buyback After Jump in 1st Half Profit -- Update

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Macquarie Group Ltd., Australia's largest investment bank, forecast a slight rise in annual profit after a better-than-expected first six months and said it would tap a capital surplus to buy back up to 1 billion Australian dollars (US$766.1 million) of its shares.

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The modest improvement in guidance for the fiscal year came after a strong first-half from Macquarie's fund management and other annuity-style businesses, helped by an increase in performance fees, that offset weakness in its capital-markets facing operations.

Macquarie, which also announced a shuffle for its finance chief and the appointment of former central bank Gov. Glenn Stevens to its board, said that while it expected its second-half profit would be lower than in the first half it now anticipated the full-year profit would slightly up on the year before. As recently as last month the bank had pointed to a full-year result broadly in line with the prior year's all-time high profit.

For the six months through September, Macquarie recorded a net profit of A$1.25 billion, a rise of 19% from A$1.05 billion the year before. Operating income increased 3.4% to A$5.4 billion from A$5.22 billion, while expenses for the period fell 1% on-year, the Sydney-based bank said.

The growth reflected an ability to adapt to changing conditions and the strength of Macquarie's global and diverse business mix, said Nicholas Moore, who has been managing director and chief executive since May 2008.

Macquarie, which began as a subsidiary of London merchant bank Hill Samuel & Co. and opened its first office in Sydney in 1970, has shifted toward more reliable asset-management, financing and commercial-banking operations over recent years to cushion volatility in investment banking and trading. Its annuity-style operations now contribute the bulk of the bank's earnings.

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The asset-management, corporate and asset finance, and banking businesses collectively generated a net profit of A$2.09 billion for the half year, a rise of 28% year-over-year helped by a large increase in fee and commission income. That countered an 18% fall in profit to A$568 million across the commodities and global markets businesses.

Assets under management slipped 2% over the three months to Sept. 30 to A$473.6 billion, which the bank said was largely due to currency movements in investment management and moves in net assets in its infrastructure and real-assets business.

Macquarie's international businesses now account for more than 60% of overall income.

In September, a consortium led by Macquarie's investing arm wrapped up the acquisition of the Norte III gas-power station under construction in Mexico. A month earlier, another Macquarie-led group of investors concluded the GBP2.3 billion acquisition of the British government's U.K. Green Investment Bank.

With the half-year results, Mr. Moore said the board had given approval to repurchase shares, subject to market conditions and any other opportunities that might absorb capital.

He also said Mr. Stevens, governor of the Reserve Bank of Australia between 2006 and 2016, would join Macquarie as an independent director from November. Mr. Stevens spent about 20 years at the central bank, leading it during a period that covered both the global financial crisis and the boom in mining investment in Australia.

As well, Chief Financial Officer Patrick Upfold will from the start of the year take over as chief risk officer from Stephen Allen, who will retire after 25 years at Macquarie. Alex Harvey, currently head of principal transactions at Macquarie Capital, will succeed Mr. Upfold, the bank said.

Macquarie plans to pay an interim dividend of A$2.05 a share, up on the A$1.90 payout a year earlier.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 26, 2017 18:50 ET (22:50 GMT)